Solid State (LSE:SOLI) — Review of Interim Results and Prospects

0:08 Good afternoon, ladies and gentlemen, and welcome to the SOLID STATE PLC interim results presentation. And to start with, if we could cover a couple of housekeeping items. Firstly, we've been asked in the past to provide an explanation of some of the terms and acronyms used in in the presentation. So for the first time, we we do actually have a glossary of these of these terms and acronyms, which will be in the handout section of your screen. So if you look to the top right hand side, you'll see chat, q and a polls, and and handouts. If you click on on the handout section, you'll be able to then preview the list of terms and acronyms. You'll then be able to close that again by by pressing the cross in the corner, and you can open and close that as many times as you like. So please do give that a try.

1:00 To start with, if we could submit the following poll, which you will now see on your screens. Throughout this presentation, investors will be in listen only mode. However, questions are encouraged and can be submitted at any time via the q and a tab, also situated on the top right hand corner of your screen, or if anyone has dialed in via solid state at walbrook p r dot com.

1:24 The company may not be in a position to answer every question that it receives during the presentation. However, the company will review all questions submitted today and publish responses where appropriate. These will be available via your investor meet company dashboard. Finally, we'd like to remind you that this presentation is being recorded. I would like to hand you now over to chief executive, Gary Marsh group finance director, Peter James and John McMichael, managing director of the components division. Gentlemen. Thank you, Tom. Welcome to the our IMC presentation. It's good to see a strong and growing following on this platform. So I hope you find the presentation helpful, and we're looking forward to to taking your questions at at the end.

2:12 So we'll we'll start by taking through the highlights in the period. So we're continuing to execute on our strategy, which enable us to deliver record revenue despite the world publicized supply chain constraints, resulting in record EPS of up up 28%, giving the board confidence to increase our interim dividend by 19% to six and a quarter p. And we're seeing strong order intake across all our target markets, which in turn translates into a new record open order book of £61,500,000 for the half year. This has now risen to 70,300,000 by the November 30, up 70% on a year end with about 95% of this order book requested for delivery this financial year and next in the balance in in our FY 2324.

3:03 During this period, we've been sticking to our netting, focusing on our strategic objectives, internationalization of the group, both in terms of sales and production footprint, development of our own brand products, broadening of our technology portfolio and communication systems, and electromechanical components, and importantly, and development of our talent. We'll cover these areas in a little more detail, a bit later on in the presentation.

3:37 So for those of you that are new to to SOLID STATE, the company is made up of two divisions. We've recently simplified descriptions of these to give you a better better description really about core activities. So systems focuses on computing, power, communications, and antenna products, and these are typically used in harsh environment applications. Our components division focus on electromechanical, optoelectronic, semiconductors, and displays together with our growing value added capability and own brand components and sourcing and obsolescence management. As you can probably well imagine, the services of this latter business unit have been in high demand with our customers over the last year.

4:23 I'll hand you over to Pete now who will talk you through some of the numbers. Thanks, Gary. So we'll we'll kick off with a couple of charts here, and you can see there on these charts, I've included the consensus guidance from WH Ireland and FinCap brokers. So revenue for the full year expectations just shy of 80,000,000, and adjusted operating profit, just over 6,000,000. In terms of revenue, reported grow revenue growth is 19%, and that benefited from the full year the first period of impact of the acquisitions of ActiveSilicon and Willow that we completed just before year end. Therefore, like for like revenue growth is about 8%.

5:09 We faced foreign currency headwinds at a revenue level on the US dollar as you saw on the previous slide. However, that does give us, with the natural hedge we've got against US dollars, gross margin level, a benefit, of about 1%. Pleasingly, though, gross margins are up. The drivers for that are the the acquisitions, rich in the mix in both of their respective divisions, and the underlying margins are up a little as well across the group, which is is very positive given the the challenges around supply chain, which are are pretty well publicized at the minute. Coming down, what does that translate into? Translates into adjusted PBT up 28% to just shy of 3,300,000 and a record EPS for the first half of just shy of 33 p.

5:58 Pleasingly, that's well on the way towards our our full year goal, of 60 p, which was to double EPS from 30 p over the last five year period. So, yeah, very pleased to to be on track for that goal.

6:15 Moving forward, as Gary talked to, we've increased the interim dividend by 19%, and that's off the back of really strong cash generation. And we can see there the net debt has fallen pretty significantly, and we'll talk to that in a little more detail, when we get to the to the cash flow. In terms of the balance sheet, we've increased our inventories there, couple couple of million pound increase on inventories, and that's as we've looked to manage the the supply chain challenges we've seen working with our customers to to manage those. And our strength of balance sheet puts us in a very good place to enable us to do that and use that as a commercial tool to our advantage. Going down, net debt, can see there has fallen from just over or just short of 4,500,000 to just under £2,000,000 in the period, and that's very pleasing. We have seen a working capital inflow where we've been seeing good credit terms from suppliers and also customers paying in advance to secure inventories.

7:19 We do anticipate that will unwind, and you'll see that on a on a chart over Leaf in terms of the expectations for second half cash generation. And we still got our facilities, 7,500,000 of bank facilities available to the group to fund future investments. So here you go. You can see the the split of underlying cash from operations being first half weighted with that working capital benefit in the first half unwinding in the second. However, pleasingly, the the cash conversion remains very strong even on a full year basis. It's just shy of a 120%. So on to the cash flow. Strong underlying operating cash generation, just shy of £5,000,000 in the first half.

8:05 We've invested just shy of £900,000 in capital equipment. That's the EMC chamber and the wirebonder for those that listen to our preliminary announcement earlier in the year. They were commissioned in Q1 and paid for in Q1. We completed the completion accounts in Q1 and made completion accounts payments of 2,600,000 for the acquisitions of Willow and ActiveSilicon. And the other big number in the cash flow is the the payment of the final dividend, which is made just before the, the AGM in September. So coming down the really sharp eye, we'll have noticed that the reduction in the deferred consideration is lower than the payments made, and that reflects the fact that the the acquisitions have really performed very well, and we've increased our provision for earn outs.

9:01 So that strong performance is is very pleasing for us and also very pleasing for for the vendors, I'm sure. I'll hand back over to Gary who will take you through few updates and and refresh on the strategy. And if there's any question on the numbers, I'll take them at the end. Thanks, Pete. There are four pillars to our strategy, which I I wanna spend a little bit of time covering as they're key to us delivering growth. So starting top right and moving clockwise on the on the slide here. At the year end, we spoke to you about how the active silicon and Willow deal significantly move forward our own brand offering with the addition of the Duracol and Hermocele EMEC range on the component side and the Harrier Imaging range of products on the system side of the business.

9:49 Looking forward, we plan to strengthen our technical capabilities in in various areas, such as our communication systems portfolio, enabling us to develop more integrated own brand system solutions. Further development work is underway on our own brand modular twenty four and forty eight volt battery battery packs, which can be easily tailored to meet various combustion engine replacement programs. Moving to internationalization of the group, similarly, both acquisitions provide a foundation which we're developing our international component sales channels. So in The USA, that's gonna be by expanding our rep network, and in The EU, building out on our own in house sales resource. With AEC, part of the Willow acquisition, providing a component manufacturing facility in The USA. And I I think having local production in The USA in such a large market will be really beneficial to us in the coming years.

10:49 In the future, one area we might look at as part of the m and a strategy is to establish an international battery assembly capability as we're engaging with tier one customers with international requirements, albeit the the ongoing COVID travel restrictions make international m and a somewhat more challenging, but but certainly not impossible. We're now able to offer our customers a broader technology suite with the addition of EDMET components, vision, and image processing modules together with circuit board level design and manufacturing. These capabilities have already proven to be invaluable in supporting our existing customers and enabling the group to build on opportunities, which frankly we couldn't have taken on previously. Looking forward, the systems division are looking to provide more integrated systems, such as developing our powertrain technology and exploring software offerings allied to our computing systems.

11:43 And on the component side, we're developing our portfolio of manufactured relays and contactors. Lastly, we've established a strong leadership team and a very a very pleasingly post acquisition. We've confirmed there are several exceptional individuals who've joined the team from from both Willow and Active. Three of them are now part of the group senior leadership team. To deliver on our growth ambitions, adding talent remains a critical element of the strategy. Recruitment of high caliber engineering, IT, and technical sales resource alongside business support in HR and finance, for example, are top priority, although challenging in this market. Myself and all all of the exec team have been working hard on this area in the last few months.

12:30 Positively, we've recruited high caliber people to the team, but the process is to develop that talent pool is taking a little longer than we we'd like owing to high demand and a limited number of suitable candidates. The remaining critical element of this equation is the engagement, development, and retention of our existing talent. This is an area where we really started to see the benefit of the growth and scale that we've achieved in recent years. We're now able to provide greater opportunities for team members, which complements the investments we're making in expanding the team. I'll now hand you over to to John. Thank you. I just wanted to spend some time, looking at the growth areas, for the business and to try and give you a flavor of where that's coming from.

13:21 As many of you know, I think, the the group provides trusted technology for demanding applications. And the key drivers of growth of the business are the adoption of green technology and, of course, emerging electronics technologies. And examples of those would be AI, autonomy, and five g systems. And as we emerge from the pandemic, there are also now critically two key macroeconomic or political drivers that are also influencing our growth. And these are the increased focus on resilient supply chains, and of course, the need to be more sustainable. We're actually benefiting from industry shifting to a make to last rather than a sort of buy and throw away model.

14:08 So right from the design concept now, we're considering the environment so that we design our hardware considering the weight, power consumption, working life, and that enables products to be updated, and thus it minimizes waste. So it's not unusual for us to be servicing product that's ten years or more, older and in out in the field. We're engineering solutions to last. So for example, we've got battery packs that can be refurbished and not thrown away. We've got ticket machines that is designed to be repaired, and control consoles that can be upgraded. All of this, though, is resulting in recurring revenues for the group. And from a technology point of view, these drivers are actually delivering opportunities in areas such as autonomy and robotics, where we see increasing applications for drones and robotic warehousing, subsea, and automated factory line inspection in IoT, and the connected world of commonly called smart cities or smart homes, where we're seeing applications for five g, for sensing, for monitoring displays, and of course, energy and EV, where we see significant need for power control and power switching alongside our more traditional areas of processing and communications.

15:32 And those examples would be charging posts and things like energy storage systems. In all of these sectors, we are active and supplying everything from semiconductors to to processing modules, vision systems, electromechanical power switching, battery packs, and indeed complete system solutions. And then from a business and process point of view, we're working diligently now to implement various initiatives and programs because frankly, the world is changing. And importantly, central government spending is reflecting the need to meet ESG objectives. And in turn, these are becoming key features of things like transport, security, and defense programs.

16:19 And with the likes of BAE now openly requiring suppliers to have and execute on ESG policies. So our business processes are being aligned closely with these major initiatives, and that's creating opportunities for us to work more closely with customers, gain a competitive advantage, and then provide a much more resilient supply chain. So for example, we're reducing the c o two emissions for our inbound and outbound freight by agreeing longer term visibility with customers. That allows us to bring in product by ocean rather than air with something like a 20 times saving in the c o two numbers for that. And, of course, we're holding buffer stocks.

17:06 We're moving production closer to the served markets, and we're holding stock closer to customers. In some cases, in fact, we're holding stock at the customer premises, and that in turn, of course, is reducing the number of journeys that our product has to take around the world and around the country.

17:23 And we're using our talent to provide local engineering support and advice to design in alternative devices to those that are currently, in short supply. So I'm sure that nobody has missed the well publicized issue of component shortages. So I thought this would be a good opportunity to let you know what we're doing to manage these shortages. The slide's fairly self explanatory, but I'd just like to take us through a few points. So we have increased our stockholding. We've prepositioned orders, and we've extended order cover where we can with our own suppliers.

18:09 We have partnered with customers to encourage much longer order schedules, and that's really strengthening the relationship with those customers. We have a very diverse supplier base, and we've got skilled application engineers that are enabling us to design in alternative components where they have shorter lead times. In some cases, in fact, we're now on the third design solution to bring forward delivery dates for customers. We're adding resource to our sourcing and obsolescence team that Gary referred to earlier, because frankly, this team has been invaluable not just to our customers, but also to the group.

18:48 And because of all of this, our position and reputation in the market has seen new customers coming to us that have been adversely impacted by shortages, and they're now wanting to engage with us because of that reputation. So what does that mean for the business? Well, obviously, we've invested in working capital. We secured and continue to secure a very strong open order book as customers are working with us to place those longer order set schedules. And, of course, as new projects come online as well, which were originally delayed by the pandemic. Our margins have remained strong. In managing the purchase price rises, we've communicated the supply chain challenges carefully to our customers.

19:35 And in truth, there's been recognition and acceptance of the need for the financial effects to be passed on into selling prices. In other words, customers are accepting price increases and understanding why those price increases are necessary.

19:50 It does come with a slight caveat, that, of course, these short term margin improvements may erode slightly as the supply chain constraints start to relax towards the middle and end of twenty twenty three.

20:05 The systems division is benefiting from the group's component supply chains, and that means they're able to get product to customers. So overall, the shortages mean that the first half growth has been adversely impacted. However, we've still delivered 8% like for like organic growth. And it's fair to say that in more normal times, I can honestly say that that growth would have been significantly higher.

20:35 One of the other things we like to keep you up to date on is just what we're doing in terms of our opportunities to grow the business, and in particular, terms of our capital expenditure. So, we're continuing to invest in technology and to develop our capabilities. And, of course, that enhances our IP and know how.

20:55 These capital investments are enabling us to deliver more integrated solutions that are, frankly, differentiating us from our competitors. So whilst at the same time, continuing our drive productivity and margin improvement and greater efficiencies. So just to give this some color, on the left hand side there is our Redditch facility. What you're seeing is our new EMC chamber, electromagnetic compatibility chamber. It's a test chamber, and Peter referred to that earlier because we just commissioned that at the time of our preliminary results. And in the center, it's our power business in Krukken, is an image of the new wirebonder. And that was ordered in the period, and it's for semi automated battery pack assembly.

21:42 And on the right of the Weymouth facility, we've continued investments in our class seven clean room with the recent installation of a new semi automated die bonder, and that's already improving throughput. It's already reducing waste, and consequently, it's improving, our efficiencies. And just to complete the picture, although it's not actually a picture on the slide, we have further investment planned at our production facility, out at AEC in The United States. And this includes the addition of a new production line for our own brand switching products under the Duracool brand. And across the group, we're looking to add new quality standards as well as differentiators. So for example, in environmental, in medical, and in aerospace.

22:29 The demonstration of these more advanced capabilities is in fact already bearing fruit. In fact, of all the tier one customers that have visited the site in Redditch and seen that the MC chamber, every one of them has spoken of how these investments really are starting to set us apart, and they're now starting to put distance between us and our competitors. So capital expenditure that's actually giving us a competitive advantage.

23:05 This year, we're celebrating our twenty fifth anniversary on AIM, and we're we're proud of our track record of having paid a dividend every year since joining the market. Our strategy places the group in an excellent position to continue scaling the business. Scale combined with our strategic focus will enable us to deliver stronger returns as as revenues increase.

23:30 Having reached approximately a £100,000,000 market cap in the period, we're in the top half of AIM companies, and we've set our sights on reaching the top quartile, and we're confident that we can achieve this. So to round up, our sector, product, and customer diversity enhanced by the most recent acquisitions continue to give us give the business resilience, enabling us to deliver fur a further period of record underlying results, Development of our own brand product range, test and measurement infrastructure, and new circuit board level design capabilities are opening up larger project opportunities with our tier one clients. M and a focus is in two areas, internationalization and product development, expanding our technology offering and IP and know how to supplement our organic growth.

24:24 We've more than doubled the size of our open order book over the last year with it now standing at record level of over 70,000,000. Our order intake remains strong with robust demand from our focus markets, including a bounce back in aerospace and energy that saw weakness caused by the pandemic. And we're confident meeting expectations for the year and with the upside dependent on supply chain constraints. And that concludes the presentation. So happy to to take any questions you may have now. Great. Thank you. Thank you, Gary. Thank you, Pete. Thank you, John. So if we could turn to the questions, we've had a number of questions submitted ahead of the presentation.

25:10 However, please continue to submit your questions using the q and a tab situated on the top right hand corner of your screen. I'd like to remind you that a recording of this presentation along with a copy of the slides and the published q and a

25:23 will be able to be accessed via your investor meet company dashboard on the platform itself. Additionally, your feedback is important to the company. So immediately after the presentation has ended, you'll be redirected for the opportunity to provide feedback. While you're submitting questions, let us first have a look at those submitted ahead of the event. One that you have touched on a little bit actually throughout the course of the presentation, but maybe we can just look at it specifically in the context of this question. What is driving the record order book? Carrie, I don't know if you wanna start us on that one. Yeah. I'll I'll make a start.

25:55 I'm sure John and Pete will have commenced tonight too. I think the thing is is firstly going back to sort of the height of COVID. We we saw our our near term open order book remaining very strong. So sort of zero to three month window remain very strong and stable. What what did reduce were the the longer term schedules, and that's really a factor of confidence.

26:24 That has now returned, supplemented obviously by supply chain issues. So we're seeing back to more normal level. We typically, prior to COVID, had a twelve month schedule from customers. Now that's gone to twelve, eighteen months from from customers now. But in addition to that, there was a a lot of pent up demand. We've done a lot of design work in in 2019, 2020. It's now now flowing through into order book from our customers as those programs start to to come online from ourselves and also through through the acquisitions we made.

27:02 So that that's a sort of multifaceted element to it. John, Pete, I don't know if you wanna add anything. But we're definitely seeing some underlying growth in the market. I don't think there's any doubt about that. The number of design starts, new projects that are starting has increased dramatically. We we monitor what we refer to as our pipeline, of activity, which is really a measure of, how much design activity is going on in the market, and that's up significantly. So I think that's, you know, a a good underlying indicator of what's going on. But the order book itself definitely driven by the new project starts and also by lengthening lead times on products where we're working with customers, as we said earlier, to secure those much longer lead time products and make sure we've got them in stock so that our customers get them and not a competitor.

27:53 And I guess from a from a slightly analytical perspective,

27:57 the order book profile, 95% is deliverable in or is up is being requested to be delivered within this financial year and next financial year. So that sort of talks to the the eighteen month order book that that Gary talked to. One other area, Tom, it's a good good question. One other area, probably should have mentioned is the a returning our energy customers and our commercial aerospace customers. They were very quiet during the height of COVID and they're returning as well. So that's also supplementing the order book.

28:31 Great. Super. We've got one fairly general question actually about acquisitions, which and I wonder if we might just expand it out because you you've made two more recent acquisitions, which obviously you comment on in in the presentation itself. But the question is, do you anticipate making further acquisitions? But I don't know whether you can just supplement that by by reflecting on the contribution that that Active and Willow have made within the results themselves as well?

29:01 We the answer to that is yes. We do. We're we're working in several areas. We're really pleased with the pipeline of acquisitions we've got. Again, some of that has been pent up demand during the period where businesses coming to the market looking to to sell. They're all really around the four key pillars of our of our strategy. So adding own brand product,

29:25 internationalization of the business, bringing in complimentary products and adding to the talent team, pleasingly, active and Willow added in all four of those areas. So we're we're really pleased with with how those acquisitions have performed. They've been a great asset to, you know, the team now. So we're looking in in areas like the power side of the business to to develop that in our computing, in sort of software where we can add to to our computing business and communications areas, also in components as well. So we've got, as I say, a strong pipeline and it's you know, we're we're working hard on those at the moment. And that's we've we've been able to do that so close to the recent acquisitions in March because of the the way they performed and the the load of integration there and that, you know, that's very pleasing to see.

30:22 Great. Okay. One one element that you you mentioned in there, which actually reflects on this next question, which is can you update on progress with own brand products? I know this is something we've reflected on in the past and and also I think is is very much a higher margin agenda. Could you just update us on own brand? Sure. Let let me take that from the component side. So we we focused on finding own brand products specifically because of the margin enhancement that it brings us. And in fact, the acquisition of Willow brought us AEC out in The United States, and they make switching products. That's an area where we're massively investing at the moment. We're looking at putting in a new product line there to make what are called contactors, and they are very high energy devices switching.

31:14 Anything from sort of 100 to 800 volts at, 200 amps and more. So quite complex, quite robust parts, but definitely giving us an advantage in the marketplace, and particularly because of this higher margin element. At the same time, we're still developing our Pacer and RAN products, down in Weymouth, and those are giving us higher levels of integration, and naturally, higher margin follows that. So keep an eye out for the Duracool brand if you're in the electronics industry because that will become a more prominent brand for the electromechanical devices. And keep an eye out for the Pacer brand if you're in the electronics and opto industry because that's becoming a much more prominent brand for the optoelectronics side of the component business. And on systems, compute there's a range of new computing products coming out, rack mounted computing offering developing their products for the security market, but also the the development ongoing development is that of our modular battery packs as well. It's when you 48 volt packs, which are you know, that that become more prevalent as as time goes on. So there's there's good work going on there, so on both sides of the business on our brand.

32:30 Great. Helpful. Thank you. Right. Couple of questions that we've just had in on the on the q and a. How have supply chain issues impacted your significant contract with your global defense customer? So depends which contract we're talking about, but I can talk to the one on the component side of the business. They, fortunately, have not impacted it at all. The contract, we've been able to continue to supply with no interruption in supply at all into this UK based large, defense subcontractor. That's in large part due to relationship we have with the supplier, but also in rec the the supplier itself recognizes the importance of the program to themselves.

33:19 So there's a selfish interest from them as well, but we've not been impacted for that specific contract. I think I'd add, John, it's fair to say that the the big defense primes were very positive when we engaged with them early and were some yeah. That they tend to be bigger businesses that are more mature in their thinking and approach to managing supply chain. And as a result, we're probably the ones that engaged with us earliest to put in order cover and helped us help them manage it. Yeah. Lovely. That's absolutely true. And their their forecasting systems are really quite sophisticated, and we can rely on them. So because of that, we've been able to preposition stock for them as well.

34:07 Great. Very helpful. A question around EPS. What annual EPS growth do you consider achievable over the medium term? Is it reasonable to continue to expect mid teens? I go first, Gary, and you can add the Yeah. You can first. So, yeah, I guess Gary's, you know, gave a direction of travel in terms of the ambition with moving from the the top half to the top quartile. And what does that relate to in in market cap terms, yeah, in excess of yeah. We're close to 100,000,000 now, give or take the share price movement on a given day. In excess of 200,000,000 is is the top quartile. So what does that mean? Well, yeah, we set a goal of doubling EPS from 30 p to 60 p to achieve that goal of getting into the top quartile where, yeah, we're likely to need to double EPS from 60 p to a to a 120 p to be at that sort of level, and that does correlate towards sort of teens in terms of year on year growth.

35:14 That said, I think it's fair to say growth over the first five year goal was not linear, and it's unlikely to be linear over the next five as well. I agree with that, Pete. We have the strategy in place to continue to deliver good strong growth for our our shareholders, and we I it's good to have demonstrated that to double the EPS in that in that five year period. I guess the one thing I would add is it's gonna be a combination of organic and acquisitive growth consistent with what we've done in the past. Yeah. Super. Okay. And I've got two questions on r and d and on CapEx expenditure. I wonder they may they may blend together, but let's just put them both out there.

36:00 So can you expand on your r and d program, I e, expected spend areas of focus? The second question, which interrelates, I suspect, is where do you see CapEx being directed over the next few years? You know, so in terms of CapEx, I can tell you that, well, let's blend the two together. We we are investing significantly in these very high energy contactors, which will come out under the Durapool range. They are at the leading edge. We have a unique application method, a unique way of of managing that switching so that we believe we can produce lighter devices.

36:49 And we're we're, right now, investing quite heavily in the r and d of that area of the business. And indeed, that's one of the reasons why we're looking at putting in a new production line out in The United States, albeit that that production line will initially produce parts that are already in the marketplace. I guess I'll add to that, John, from a systems side. Yeah. Where where in in our systems division, the r and d focus is around developing products for applications. So I would say it's more the development rather than the blue sky research. So we we don't do a huge amount of speculative blue sky where we play as much more around the the development.

37:37 We do benefit from r and d tax credits pretty significantly. Battery packs is clearly an area where we develop solutions for our customers and for their particular applications and environments, whether that be, yeah, very low temperatures to very high temperatures. BMS is an area we've invested quite a lot of time and energy over the the last twenty four months, and that's around the sort of the control mechanisms attached to battery packs. But that said, yeah, Gary talked to some of the new rec mounted, computing platforms as well. So, yeah, we continue to invest in r and d across the group. And John talked about some of the, the capital equipment for power in that, new wirebonder for for the facility down in Crewe Cairn, And it's all around delivering better quality, higher reliability, higher performance, which helps us drive improved value add to customers and margin for us.

38:40 Great. Okay. Anything to add there from from your side, Gary? Or is that I think they both covered it appropriately. Great. Okay. Fine. So final question now. And and this is this is probably one for for for you, Pete, and then we'll we'll move to close. But inventory levels are high. Do you anticipate this remaining? I think it's fair to say one of the things I've been saying to the guys is, yeah, no one will thank me for having cash in the bank and no stock to sell. Inventory is always on a given day. It's a snapshot. We do see quite significant changes in our inventory depending on have we just had a really big receipt or have we had a really big shipment go out. I think, yeah, John's talked to the the supply chain constraints.

39:25 Yeah. I don't think we think they're gonna get worse, but we don't think they're gonna get better or significantly better anytime soon. Therefore, our commitment to working capital to manage supply chain for our customers is going to be maintained over the coming months. And, yeah, in terms of financing the business, my view is that that working capital increased, I hope will be maintained longer than that because that suggests we're growing the business successfully as well. So I'm not working on the basis that I'm gonna get this cash back. I'm working on the basis that the guys are gonna grow the top line and keep it utilized effectively. Great. Encouraging. Great. Super. Okay. Thank you, Gary, Pete, John, for updating everyone today. Could I ask investors not to close this session as you'll be now be automatically redirected for the opportunity to provide your feedback?

40:15 If you access this meeting from the website, the feedback page will appear. If you access from a from a link, then you'll be asked to log in to submit your feedback. If anyone has any further questions or would like additional information on SOLID STATE, please do get in touch for us, SOLIDSTATE@WarburgPR.com. And alternative alternatively, thank you for joining us today, and we look forward to updating you again soon. Thank you. Thank you. Thanks, guys.